To achieve its objective of price stability, the European Central Bank (ECB) uses a series of monetary policy instruments. The main instrument is the set of key interest rates, which it steers through open market operations, standing facilities and minimum reserve requirements. However, since the financial crisis, the ECB has introduced new tools, complementing these instruments, to respond flexibly to the new challenges that have arisen with the aim of keeping inflation at 2% over the medium-term (see the section on the ECB’s monetary policy strategy). These new tools include negative interest rate policies (NIRP), targeted longer-term refinancing operations and a broad asset purchase programme. Added to this is forward guidance, through which the ECB announces its intentions with regard to the path of key interest rates and the horizon of its asset purchase programme.
